For a procurement manager or team, fulfilling the procurement objectives of the organisation requires a choice of ‘management paths’. In this article, we’ll look at operational procurement vs strategic procurement, explaining how they work within a unified procurement strategy.
What Is Operational Procurement?
Operational procurement focuses on acquiring the goods and services that are needed for an organisation’s day-to-day operations. This includes managing inventory levels, processing vendor invoices, matching statements, receiving goods, and issuing purchase orders. Essentially, operational procurement keeps the everyday processes running smoothly.
To clarify how operational procurement differs from other procurement types:
-
Tactical procurement involves planning and actions aimed at achieving specific short- to mid-term goals, such as immediate cost savings and efficiency improvements.
-
Strategic procurement focuses on building strong supplier relationships, mitigating risks, and implementing strategies to optimise procurement in the long term.
In contrast, operational procurement is about the practical, day-to-day purchases that ensure the organisation can continue functioning effectively. The costs involved in operational procurement may seem small individually, but they accumulate to make a significant impact. A lean and efficient approach to operational procurement can lead to various benefits, such as:
-
Higher profit margins
-
Reduced vendor risk
-
Enhanced supplier diversity
-
Improved operational efficiency
Strategic Procurement Solutions
On its own, however, operational procurement isn’t sufficient to deliver organisation-wide strategic savings. For this, it has to be coupled with a long-term planning approach that includes decisions about which products and services to deliver the most competitive lifetime cost of ownership.
Investing in a strategic procurement approach helps to drive innovation and growth, and can be used to identify emerging market trends and opportunities, while enhancing agility in the face of change. For a strategic procurement solution to be successful, it has to align with the organisation’s mid-to long-term goals, and accurately reflect the competitive environment and regulatory landscape.
There are various best practices for achieving this alignment, such as:
-
Continuous improvement – a comprehensive and regular review of procurement processes, incorporating feedback and data insights to increase efficiency and effectiveness over time.
-
Supplier diversification – avoiding dependence on a single supplier can reduce operational risk and increase your competitive advantage.
-
Risk management – identifying and assessing potential risks in your supply chain and procurement strategy will help you develop robust contingency plans to mitigate them, making your supply network more agile and resilient.
With this achieved, strategic procurement has the potential to enhance efficiency, drive long-term cost savings, and improve business decision-making, as well as improving sustainability and social responsibility.
Next Steps
Please contact one of our experienced team at Quantum 360 today for expert advice or more information about how we can support your organisation.
